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Why do few startups scale? Most attempts to answer this question focus on the supply of talent, markets, finance or other environmental factors. This report offers a different perspective by looking at entrepreneurs' demand for growth and finance, a less explored driver of scaling.

Conversations with 64 startup and scaleup founders offers a peek into their minds. By combining rich data on entrepreneurs’ motivations, perceptions and mindsets, with an extensive review of European data sources, we offer novel insights to help entrepreneurs beat the scaling odds.

Key findings

  • The path to scaling puts large cognitive demands on entrepreneurs. These can pose substantial hurdles for many: we estimate that only around two per cent of entrepreneurs are likely to overcome the demand-side hurdles to seeking finance for growth.
  • The key hurdles include a lack of a growth mindset, little awareness of finance options and a lack of time and confidence to speak to investors and raise capital.
  • Growth-oriented entrepreneurs share four mindset features: Typically, these entrepreneurs want to innovate, create a positive impact on society, become a dominant player in their field and create value.
  • Growth is an individual process, often spurred by personal triggers. This realisation has important implications for when and where to best target support.

Recommendations

  • Nurture entrepreneurial growth mindsets, by including mindsets training alongside business practices and incorporating a growth mindset across the education spectrum.
  • Improve awareness of and access to resources for growth, such as through finance hubs with interactive tools for tailored advice, partnerships to expand the reach of matchmaking platforms, and peer-to-peer learning.
  • Facilitate risk-taking, such as through loan guarantees for startups, ‘second chance’ policies and the removal of perverse tax biases that discourage growth.

The shorter Motivations to Scale: A policy playbook summarises the report's key findings and recommendations.

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Authors

Charlotte Reypens

Charlotte Reypens

Charlotte Reypens

Senior Policy Researcher (Startups & Entrepreneurship), New Technology & Startups

Charlotte carries out research projects to understand how startups and entrepreneurship can be supported across Europe.

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Denise Van Blitterswijk

Denise Van Blitterswijk

Denise Van Blitterswijk

Senior Policy Advisor, New Technology & Startup Research

Denise carries out research projects that inform startup and entrepreneurship policy across Europe.

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Christopher Haley

Christopher Haley

Christopher Haley

Head of New Technology & Startup Research

Chris leads Nesta's research interests into how startups and new technologies can drive economic growth, and what this means for businesses, intermediaries and for the government.

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